Robinhood Settles SEC Charges for $45M

Robinhood, a brokerage platform, has reached a $45 million settlement with the US SEC after the regulator claimed that Robinhood breached US laws.

The SEC, in a statement, claimed two Robinhood entities admitted to its investigations, having failed to maintain records of customer interactions between 2020 to 2021.

Failure to Implement Strong Reporting Systems

Robinhood made nearly 12,000 reports to the SEC—known as Electronic Blue Sheets (EBS)—that were either incomplete or had wrong information. These reports are essential for tracking trading activity, but Robinhood’s mistakes affected the accuracy of data for at least 392 million transactions.

The SEC faulted Robinhood in other critical areas. The regulator noted that between January 2020 and March 2022, Robinhood failed to promptly report suspicious activities. Additionally, from April 2019 to July 2022, the brokerage firm failed to implement sufficient systems to prevent identity theft.

The regulator also flagged violations of “Regulation SHO,” a rule designed to prevent abusive short-selling practices. This is where the company ignored from December 2019 to May 2022. In addition, a cybersecurity vulnerability in 2021 allowed an unauthorized party to access data from millions of customers.

Both Entities to Pay $45M in Fines

In response to these findings, Robinhood Securities and Financial admitted their shortcomings. Robinhood Securities agreed to pay $33.5 million in penalties, while Robinhood Financial will pay $11.5 million. Both firms have until January 27 to clear the fines.

The SEC wrote, “Today’s order finds that two Robinhood firms failed to observe a broad array of significant regulatory requirements, including failing to accurately report trading activity, comply with short sale rules, submit timely suspicious activity reports, maintain books and records, and safeguard customer information.”

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